CT Imposes New Electronic Tax Return Filing Requirements in 2014

CT Imposes New Electronic Tax Return Filing Requirements in 2014

Dear Treasurers & Finance Chairs in CT (copy to Pastors),

Please see the communication below that I recently received from our auditors. For now, this only applies to churches in CT and most likely only to "income tax withholdings" since, generally speaking, the other taxes listed below are not applicable to churches. My wife, who is Treasurer of Darien UMC, tells me that the the TSC (Taxpayer Service Center) web-site is actually very easy to use.

From O'Connor Davies, LLP:

In the future, perhaps all tax returns will be required to be filed electronically. Effective this month, the state of Connecticut took a step in that direction. For tax periods beginning on or after January 1, 2014, the Connecticut Department of Revenue Services (DRS) will require everyone registered for any of the following seven taxes to not only file returns electronically, but also pay the associated taxes that way too:

What if a taxpayer fails to file and pay electronically and still sends in a paper return and a check? The DRS has made it clear that the taxpayer will be subject to a 10% "Failure to Comply" penalty. The penalty will be imposed even if the paper check payment is received timely.

Taxpayers who are now required to file any of the seven taxes will need to create an account through the Connecticut Taxpayer Service Center (TSC). Those who use a payroll company or tax service have the burden of confirming that their service provider is properly filing and paying electronically.

Examples of the start dates for the requirement to file and pay electronically are as follows:

For those taxpayers who file their tax returns on a monthly basis: your first required electronically filed return for the period ending January 31, 2014 is due by February 28, 2014.

For those taxpayers who file their tax returns on a quarterly basis: your first required electronically filed return for the period ending March 31, 2014 is due by April 30, 2014.

For those taxpayers who file their tax returns on an annual basis: your first required electronically filed return for the period ending December 31, 2014 is due by January 31, 2015.

For those taxpayers who must remit their income tax withholding on a monthly payment frequency: the due date for the January remittance is February 15, 2014 (extended to Monday 2/17/2014).

The new Connecticut requirements are in addition to others previously announced. Tax practitioners that prepare 50 or more prior year Connecticut income tax returns are required to file electronically.

So, why is the DRS imposing the new electronic filing and paying requirement? In its 2014 Electronic Filing Requirements Notice, the DRS states its "an effort to streamline the way DRS conducts business and becom[es] more environmentally 'green' by eliminating paper." There are likely cost savings as well.

In any event, taxpayers should ensure that they are prepared to file and pay the relevant returns electronically. In addition, they should speak to their payroll service providers on the issue as well.